1. Field of the Invention
The present invention relates generally to a system and method for supporting a security-trade financing service, and more particularly, to a system and method for evaluating data relating to a procurement plan to determine a plan cost basis of certain inventory items and for determining a cash/trade-credit blend based on the plan cost basis and a valuation analysis of a company seeking capital.
2. Background of the Related Art
Barter trading is basically the purchasing of goods and/or services with other goods and/or services (the term goods and/or services are referred to herein as products). It is the oldest form of commerce. With the rise of currency, barter trading eventually became a marginal phenomena.
Today, barter trading has become commonplace again, but now encompasses more than the trading of products. More specifically, barter trading has evolved well beyond its historical definition and now includes trading a combination of products, cash, and trade credits. For this reason, such transactions are identified herein generally as “trading transactions.” Furthermore, an entity that supports such transactions is identified herein as a “trading company.” Any type of company can be a trading company, as long as it performs the functions as described herein.
Trade credits are any credits that are issued by a trading company which are redeemable by themselves, or in combination with cash, for products as agreed in a trading transaction between a trading company and another company.
A large variety of products are presently traded. Such products include media (e.g., TV, radio, print, and Internet), travel (e.g., air, hotel, and car rental), printing (e.g., offset, gravure, and flexography), accounting services, shipping services, real estate (e.g., office space, storage, and lots), food products, household goods (e.g., stoves, toasters, and lawnmowers), capital goods (e.g., milling and turning machines, television studio equipment, and buildings), legal services, and web design services. The type of product that can be included in a trading transaction is limitless.
A typical trading transaction includes a deficient-asset company, i.e., a seller of deficient products or deficient assets, selling products to a trading company in exchange for trade credits or trade credits in combination with cash. The trade credits, e.g., denominated in dollars, are redeemable for products and can be described generally as worth a dollar of non-cash receivables. The deficient-asset company generally records the sale at the book or fair market value of the assets sold. The trading company will typically dispose of the deficient asset at market value, which is usually substantially lower than the sellers book value. The deficient-asset company's motivation for executing the transaction is in receiving excess market value over the full life of the transaction.
The seller of the asset simultaneously or subsequently pays for various products by redeeming trade credits, or pays for the products partly by paying cash and partly by redeeming trade credits. The combination of cash and trade credits is referred to herein as a cash/trade-credit blend.
Referring to FIG. 1, a block diagram illustrates several examples of trading transactions. Those skilled in the art will appreciate that the examples illustrated and described below are not exhaustive.
Generally, a trading company TC will include a marketing group MG, financial group FG, and an inventory group IG to support a trading transaction. The marketing group MG seeks investment opportunities and promotes business opportunities to corporations seeking to trade products. The financing group FG provides financing expertise to support trading transactions arranged by the marketing group MG. The inventory group IG manages the inventory INV that is purchased and sold through trading transactions. Trading transactions typically include trading various types of products, inventory INV, trade credits Tcr, and a combination of cash $ and trade credits Tcr.
An example of a trading transaction is illustrated in FIG. 1, wherein deficient-asset company DAC-1 is a hotel having a predetermined average number of vacant rooms, i.e., deficient asset DA-1, over a period of time. In order to draw value from the vacant rooms DA-1, the hotel DAC-1 agrees to a trading transaction with the trading company TC to trade the vacant rooms DA-1 for trade credits Tcr. The trade credits Tcr are considered equal to cash, e.g., on a dollar-for-dollar basis, by the trading company TC and may be redeemed at any time in the future for products in the trading company's TC inventory INV. The products in inventory may include media, travel, goods, etc., as described above. After a trading transaction is made, the hotel rooms DA-1 are identified as an inventory item in the trading company's TC books.
Another example of a trading transaction is illustrated in FIG. 1, wherein deficient-asset company DAC-2 is a video equipment manufacturer seeking a customer to purchase their modern video equipment DA-2. Because such equipment can be prohibitively expensive to a customer seeking to purchase such video equipment, trading transactions may be used to offset at least a portion of the cost. More specifically, the trading company TC facilitates the transaction by purchasing the video equipment with a cash/trade-credit blend $/Tcr. After the trading transaction is made, the video equipment DA-2 is identified as an inventory item in the trading company's TC books.
An extension of the trading transaction described immediately above is illustrated in FIG. 1, wherein a deficient-asset company DAC-3 is a news network in need of that same modern video equipment to operate efficiently, however, does not have sufficient cash for its purchase. In order to draw value from anticipated open advertisement slots DA-3, news network DAC-3 agrees to trade the anticipated open advertisement slots DA-3 for the modern video equipment A in the trading company's TC inventory. After the trading transaction is made, the anticipated open advertisement slots DA-3 are identified as an inventory item, and the modern video equipment is removed from the trading company's TC books.
Those skilled in the art will recognize that other similar types of trading transactions may be made, wherein a deficient-asset company DAC-n has an identifiable deficient asset DA-n that it would like to sell. And furthermore, wherein the trading company TC agrees with the deficient-asset company DAC-n to trade the deficient asset DA-n for trade credits Tcr or a cash/trade-credit blend $/Tcr (identified generally as X).
It is notable that the trading company TC benefits in each trading transaction by purchasing the deficient assets DA-n at a significant discount. The deficient-asset companies DAC-n also benefit, as they are not burdened with products that would otherwise have to be liquidated, are wholly or partially perishable, or have low marginal costs.
With continued reference to FIG. 1, illustrated are several examples of trading transactions wherein inventory INV is purchased from the trade company for trade credits Tcr or a cash/trade-credit blend ($/Tcr). In such trading transactions, trade credits are being redeemed for products. Those skilled in the art will appreciate that the examples illustrated and described herein are not exhaustive.
An example of a trading transaction involving the sale of inventory follows. A purchaser company PC-1 is a local news publisher seeking to purchase a modern printing press, however, it does not having sufficient cash to do so. Furthermore, a trading company TC has the modern printing press INV-1 in inventory INV from an earlier trading transaction made with a printing-press manufacturer. The news publisher PC-1 previously sold advertisement space to the trading company TC, therefore, it has accumulated a number of trade credits Tcr. The news publisher PC-1 purchases the desired printing press INV-1 for trade-credits Tcr.
Another example of a trading transaction involving the sale of inventory follows. A purchaser company PC-2 is a cosmetics manufacturer that is seeking to purchase media to promote its goods. The cosmetics manufacturer PC-2 previously sold a deficient asset (e.g., the goods did not meet specifications) to the trading company TC, therefore, it has accumulated a number of trade credits Tcr. Utilizing the trade credits Tcr in combination with cash $ it has available, the cosmetics manufacturer PC-2 is able to purchase a desired media package INV-2 for a cash/trade-credit blend $/Tcr.
Those skilled in the art will recognize other similar types of trading transactions that may be made, wherein a purchasing company PC-n has an identifiable need for products INV-n in the inventory INV of the trading company TC. Furthermore, wherein the trading company TC may make a trading transaction with the purchasing company PC-n to trade the product INV-n for trade credits Tcr, or a cash/trade-credit blend $/Tcr.
Until now, trade transactions have been available primarily to companies that have the capacity to generate and make available deficient assets for trading purposes. Less established companies, for example, start-up companies, have not been able to enjoy the benefits that trading transactions provide. Also, companies requiring capital, but having products that do not readily lend themselves to trading transactions, have not been able to take advantage of the benefits of such transactions.
Oftentimes, such companies find themselves in a catch-22 situation, wherein they require certain resources, for example, capital equipment and media, to promote and grow their business, however, they are unable to obtain the resources or financing therefor until they demonstrate such growth. Of course, this paradoxical situation tends to stifle the growth of a small company and can even lead to its demise.
Companies finding themselves in such situations have a limited number of ways of obtaining needed resources. Among other methods, such companies may seek venture capital funds from outside investors. A disadvantage of this alternative is that the venture capital funds typically have a high cost of capital. In addition, venture capitalists will often value the company at a level that falls significantly below the expectations of the company seeking capital.
From the above, it is understood that a system and method is needed to provide resources to companies that need such resources to grow. In addition, a system and method is needed to facilitate the financing of a company holding few deficient assets, however, have significant growth potential. Furthermore, a system and method is needed that is easy to operate and readily integrated into the various technical systems and business methods presently employed in the marketplace.